Loan prepayment calculator

Loan prepayment calculator: the basics

Estimate how extra principal payments could shorten an existing fixed-rate loan and reduce its remaining interest.

How to use the inputs

• Current loan balance: Enter the balance still owed, from 1 to 1 billion currency units, not the original borrowed amount.
• Annual interest rate: Enter a fixed annual percentage from 0 to 50. The monthly rate is this number divided by 1200.
• Remaining loan term: Enter 1 to 50 whole years remaining. The original payment is recalculated from this term and balance.
• Additional monthly payment (optional): Enter an additional amount paid every month; blank means zero. Up to 1 billion is supported, but actual payments are capped at the debt owed.
• One-time prepayment (optional): Enter an optional one-time payment up to 1 billion; blank means zero.
• Lump-sum payment month: When a lump sum is entered, choose a whole month from 1 to the remaining term in months. It is ignored if the loan is paid off earlier.

Change an input to update the results. Add up to four scenarios to compare separate assumptions; reset affects only the selected scenario.

Understanding the results

• Original monthly payment is the payment needed without prepayments. Revised payoff time counts whole monthly payment dates; time saved compares it with the original term.
• Original remaining interest covers the remaining term only. Revised interest adds the interest actually accrued before accelerated payoff; interest saved is the difference.
• Each color is a separate scenario. Dotted lines show its original balance and solid lines its accelerated balance, sampled monthly. The table contains the exact same scenario results.

The formula, in words

Let P be current balance, R the annual percentage, r = R / 1200 the monthly decimal rate, and n = 12 × years. Original payment A = P × r / (1 − (1 + r) raised to −n). At zero interest, A = P / n.

Each month: interest = opening balance × r; amount owed = opening balance + interest. Pay the smaller of amount owed and A + extra. Then apply any selected lump sum, capped at the remaining debt. Stop when no debt remains.

For numerical stability, the chart evaluates the original remaining payments as a present value and subtracts the accumulated effect of extra payments and avoided interest. This is equivalent to the monthly schedule without subtracting enormous compounded amounts.

Interest saved = original remaining interest − revised interest. Time saved = n − revised payoff months.

Assumptions and limits

• Interest compounds monthly at a constant nominal annual rate divided by 12. Scheduled and extra monthly payments arrive at month-end; the lump sum follows those payments in its selected month.
• The scheduled payment remains unchanged after prepayment; the term shortens. Payments are capped, including the final payment, so excess entered amounts are not charged.
• Full-precision payments and balances drive interest and payoff calculations, not the displayed whole-currency payment. A lender that rounds each payment to cents can produce a different schedule.
• No lender fees, prepayment penalties, taxes, variable rates, daily interest or payment holidays are modeled. At zero interest there is no interest to save, but time may be saved.

Currency results display whole units; other numbers show at most one decimal place. Calculations keep full precision unless whole units must be rounded up for break-even. Rounded figures may not add up exactly.

Results of a trillion or more use scientific notation with up to three decimal places; for example, 1E12 means one trillion. Very small gains may round to zero.

Examples below use USD and local number formatting. Country selection changes currency labels, formatting and terminology; it does not convert money or automatically apply local tax or lender rules.

Worked example

This fixed example uses the calculator’s default inputs; it does not change when you edit a scenario. Any example interest or return rate is an assumption, not a guaranteed outcome.

Current loan balance

USD 12,000

Annual interest rate

6%

Remaining loan term

1 years

Additional monthly payment (optional)

USD 100

One-time prepayment (optional)

USD 0

Lump-sum payment month

1 months

At a monthly rate of 0.5%, the original payment is USD 1,033. Adding USD 100 each month pays the loan off in 11 months, saving 1 months and USD 33 in interest. No lump sum is applied in this example.

Revised payoff time

11 months

Original monthly payment

USD 1,033

Time saved

1 months

Original remaining interest

USD 394

Revised interest

USD 361

Interest saved

USD 33

Common questions

Does prepayment lower my monthly payment?

This model keeps the original scheduled payment and reduces the term. A lender recasting the payment instead would need a different calculation.

What if I enter more than I owe?

Only the debt due is paid. Unused extra money is not charged, and a lump sum scheduled after payoff is ignored.

Why might my lender show another payoff amount?

Daily accrual, rounded payments, fees and prepayment restrictions can differ from this monthly fixed-rate estimate.